California Insurance Lawyer Blog

The American Association for Long-Term Care Insurance reported this month the results of a study that analyzed the cost of long-term care insurance for typical purchasers. Most people under age 61 pay from $500 to $1500 a year, much less than what many people think such insurance will cost. That works out to less than $20 a week for most wage-earners, said AALTCI executive director Jesse Slome.

The report also provide tips about how to further reduce the cost of premiums, including trying to qualify for a preferred health discount, selecting a 90-day elimination period, chooses a spousal “share-care” option, and shopping around among carriers for the best coverage at the most affordable rate.

It might be easy to dismiss this study as self-interested, since the AALTCI, according to its web site serves “those who offer long-term care insurance and other planning solutions.” In addition, the timing is suspicious, the report arriving just months after passage of the CLASS Act, the part of the federal government’s healthcare reform package that will create a voluntary government-run long-term care insurance program. Average premiums under that program are estimated to start at $100 to $240 a month ($1200 to $2880 a year) and pay out a mere $50 to $75 a day – too much for too little, some critics have said.

Nevertheless, this report may be an indication that the LTC industry is working swiftly to get ahead of the government program by creating highly competitive long-term care products. And if there is going to be an LTC price war, now might be the time – no matter what your age – to purchase coverage.

As we frequently note in this blog, LTC coverage is about the only option for people who must pay for in-home or assisted living care when they are ill or aged. Work with a reputable agent who can find you the right policy with a well-capitalized carrier. Research what care cost will be by the time you could need it, and plan accordingly. Although in the end you may have to fight with your carrier to receive benefits, it’s better to have that option than none at all.

To examine the report go to http://www.aaltci.org/news/long-term-care-association-news/report-what-people-pay-for-ltc-health-insurance.

Do you, or does someone you know have a Long Term Care Policy from a n insurance company that refused to pay benefits? Was that denial based upon the fact that the agency providing care was not "licensed" or "approved?" We are seeing this more and more, and we are suing these companies on behalf of our clients.

The insurance companies twist the language of these policies so as to argue that care providers must be licensed by the State of California. The fact is, however, California does not require licensing for certain classes of care providers, and they couldn't get licensed by the state even if they wanted to! Most of these policies contain provisions which pay for "Home Health Care Services," or services from a "Home Health Care Agency." Sometimes, the benefits are characterized as "Personal Care Services" or "Instrumental Activities of Daily Living."

Companies we've seen denying benefits on grounds the agency is not licensed include Conseco Senior Health, Senior Health Insurance Company (SHIP), Transport Life, American Travelers Life and others.

Don't let these companies get away with not paying you benefits! Call us. We don't charge for an initial interview, and if we take the case, it will be on a contingency, so you won't have to pay attorneys fees on an hourly basis.

800-446-7529

The new federal healthcare legislation could bestow broad new powers on California’s next insurance commissioner, already one of the nation’s most powerful jobs of its kind, reports the Los Angeles Times. “Healthcare reform raises the stakes in California insurance commissioner election.” Four candidates are running for their parties’ nominations in the June 8 primary election -- Democrats Dave Jones and Hector De La Torre, and Republicans Brian D. Fitzgerald and Mike Villines – and the winner of the June 8 primary will face four other minor party candidates in November.

In addition to new authority under federal law, the insurance commissioner may gain the regulatory powers currently under the charge of the California Department of Managed Healthcare, which oversees health maintenance organizations, if the Legislature approves and the governor signs a bill that would shift all regulatory power to the commissioner.

This year’s insurance commissioner race is one of the most important in the state’s history.

We support Democrat Dave Jones, who proved a strong consumer advocate while serving as a California Assemblymember. In addition to supporting the regulatory shift from the Department of Managed Healthcare, Jones wants California lawmakers to give the commissioner the power to approve or reject insurer requests for rate increases, subjecting health insurance rates to the same detailed approval process that applies to automobile, home and other types of property and casualty insurance.

“I’ll be working to impose rate regulation on health insurance and healthcare plans to rein in the excessive rate increases that have afflicted California consumers year after year for the past 10 years,” Jones told the Times.

We believe Jones has the experience, leadership skills and ability to protect consumers as insurance commissioner, as well as hold insurance companies accountable when they break the law or deny benefits their customers rightfully deserve. From what we have seen thus far, he is fully capable of fulfilling the challenges facing the state and the insurance industry during the next four years and of building a bureaucracy that works in the consumers’ interests.

Los Angeles Times business columnist Michael Hiltzik recently wrote about retired state employees who purchased a long-term care insurance policy in 1997. Unfortunately, like many others who had purchased long term care insurance years ago, the couple could no longer afford the insurance because premiums had increased 100 percent. See, “Long-Term Care Policies: Pouring Money Down a Hole?” http://www.latimes.com/business/la-fi-hiltzik7-2010apr07,0,7567632.column.
Many people who believed they were responsibly planning for the future by purchasing long-term care insurance in the late 1980’s or early 90’s are encountering this problem: Almost every insurer selling long-term care products at that time underpriced their policies. As a result during the past decade, these carriers have successfully obtained approval from state agencies to raise the premiums for their products. It is not unusual for a premium increase to be 40 percent to 50 percent of the original price. Unfortunately, these increases come at a time when many of the policyholders are now on a fixed income and cannot afford the increased cost.
Policyholders who purchased policies before 1993 may have another critical but less publicized issue in addition to substantial premium increases: outdated protection. If policyholders purchased “nursing home” only policies, their insurance carriers will likely contend the policies do not cover the more popular assisted living facilities.
Additionally, a policyholder may have purchased a “home healthcare” benefit policy, which is intended to pay for services rendered by a home healthcare aide in one’s “home.” Although an insured may have relocated his or her residence to an assisted living facility, a carrier may not pay because it contends that the facility is not the insured’s “home.”
At Kantor & Kantor, we provide assistance to those policyholders who have been unfairly denied benefits under long-term care policies, and we have successfully argued that benefits cover assisted living facilities. If your long-term care insurer has denied benefits based on policy language, we can help.

-CC

Although it’s much too soon to tell how the federal healthcare overhaul will affect the way the insurance industry conducts business, the bill may have done a few things right. “Immediate Effects of Health Reform Bill.” A few provisions go into effect in six months; others won’t be enforceable until 2014.

• People whose policies are rescinded through no fault of their own are now protected under federal law. Even though rescission is regulated under the law of most states, carriers tend to ignore the laws and do as they please until they are caught, then pay moderate fines. How the federal government will enforce this provision remains to be seen.
• People with pre-existing conditions can no longer be denied coverage; however, because the bill doesn’t regulate caps and increases, insurers can change as much as they want and increase when they feel like it. The federal plan does provide a government program for people whose health problems make them uninsurable now.
• Insurers can no longer place lifetime caps on benefits and annual limits on coverage.

If insurers don’t find a way to wriggle out of these three reforms, the bill imposes important measures that are necessary to rein in abusive industry practices. But we don’t expect the industry to embrace reform without a fight.

Rather than criticizing the bill for its flaws, which many say include an inability to contain costs, industry and enterprise could turn this into an opportunity to provide products and services both affordable and sustainable for this century.

The CLASS Act, the part of the federal healthcare overhaul that creates a payroll deduction for long-term care similar to Social Security, may survive to make it into the final version of a combined congressional bill and become law, writes James Oliphant in the Los Angeles Times.“Government Insurance for Long-Term Care Likely to Slip Into Final Healthcare Bill,” http://www.latimes.com/news/nation-and-world/la-na-health-longterm31-2009dec31,0,4138098.story.

Members of both the Senate and House of Representatives support the act, which is voluntary and requires payment into the plan for five years before a participant is entitled to receive benefits. The CLASS Act is also controversial.

Proponents, particularly those who lobby for the elderly and disabled, praise the act because it allows people the option to remain in their homes, paying for in-home caregivers without depleting the resources and energy of family members. Opponents believe the act won’t pay for itself and will require a government bailout to remain functional.

We believe the discourse about long-term care insurance – whether through the government plan or private insurance – is a necessary discussion to alert this country about a very important aspect of planning for the future. Whether the CLASS Act is the right solution, and whether it will even survive the House, remains to be seen.

Either way, it's our opinion that for the time being insurers need to reformulate their offerings and claims paying practices in order that people can obtain and afford, and then realize the benefits they need.

Long-term care advocate and blogger Howard Gleckman weighs in on the CLASS Act, the federal government’s long-term care proposal included in pending health care legislation, for Kaiser Health News. See “Will People Buy Government Long-Term Care Insurance,”
http://www.kaiserhealthnews.org/Columns/2009/November/111609Gleckman.aspx.

Gleckman predicts that significantly more people will purchase government LTC coverage than those who currently purchase private insurance, but it still won’t be enough to solve the nation’s long-term care challenges. To increase purchasers, Gleckman suggests the following:

First, make coverage mandatory and require all major employers to offer it. If employees are allowed to opt out, impose tough penalties on both employers and workers who don’t participate.

Second, do more to encourage young employees to buy coverage. Determine premium amounts by age at enrollment and never increase (or only moderately increase) premiums, while providing more benefits as policyholders age. That way, workers would enroll while they are young and healthy to avoid costly premiums when they need coverage.

Third, the government could give employers financial incentives to match worker contributions.

Let's see what, if anything, the ultimate health care bill will contain on the Long Term Care question.

"Tort Reform, Tort Reform, Tort Reform," the phrase has almost become a song. Nobody likes to see undeserving people win huge, unjustified damage awards, but the fact is, it doesn't really happen in California, except on maybe on TV. Los Angeles Times business columnist Michael Hiltzik couldn’t be more correct when he writes that one of the biggest fans of so-called tort reform is the insurance industry, “because the less money they pay out to plaintiffs, the more they get to keep.” See “Why Tort Reform Is a Frivolous Diversion.”

While that statement is enough to make sensible people wary of the deep pockets behind tort reform movements, Hiltzik clears the confusion and makes a very good case about why limiting an injured victim’s ability to use the legal system to be made whole is not the great fix for rising medical costs insurers and many politicians claim.

The argument for tort reform, as Hiltzik explains, is that plaintiff lawyers are filing too many “frivolous” lawsuits and claiming millions of undeserved dollars. Doctors are ordering unnecessary tests to ensure they don’t misdiagnose or fail to diagnose something that could end up in court. As a result, medical costs escalate.

“The truth is that medical liability isn’t a big driver of health costs overall,” Hiltzik writes. “[T]he cost of malpractice litigation, in court and through defensive medicine, [is] roughly 2% to 3% of all U.S. healthcare spending.”

In California, since 1975, the Medical Injury Compensation Reform Act (MICRA) has capped recovery for pain and suffering to $250,000. That’s next to nothing when to compared to what plaintiffs can receive in other types of cases. Lawyers’ fees are also limited.

But did MICRA help consumers? According to a 2004 Rand study, the MICRA caps don’t amount to a fair distribution of justice. Victims of medical errors who had small economic losses but suffered major damage to their quality of life are unfairly compensated. Women are disproportionately affected. The MICRA cap isn’t adjusted for inflation. In today’s dollars, the award has the same purchasing power as $62,000 did in 1975. And the most unsettling result of all is that may unjustly injured people won’t even pursue a case because the award may not even cover the litigation cost.

The big MICRA winners are insurers, who last year paid out only 17 cents of every dollar they collected on medical malpractice insurance. And carriers don’t even have the good sense to be humble about it.

“At American Physicians Capital,” writes Hiltzik, “claims were falling so fast in 2007 that its chief executive publicly compared his underemployed claims managers to ‘the Maytag repairman.’ The next time you find yourself nodding in assent while some politician carries on about tort reform, remember that its benefits will go to characters like this.”

Clearly, this only reinforces what we’ve been saying all along: If you want real reform, start with the perpetrators, not the victims.

The LTC Guild, a forum for long-term care insurance agents, recently launched its “3 in 4 need more” campaign to educate consumers about the number of Americas over 65 who will likely require some type of long-term care service in their future. According to the U.S. Department of Health and Human Services, that’s about 70 percent of us.

The focus of the campaign is to highlight why long-term care insurance is such a necessity. Medicare will NOT cover most of the long-term care services the majority if us will need. Right now, long-term care is the only safety net for most people. In the highly unlikely event long-term care coverage becomes part of federal healthcare reform, that option may still not pay for the quality of services that a private plan would.

We support the LTC Guild’s public awareness campaign.

For more information about the “3 in 4 need more campaign, log on to http://ltcguild.ning.com/page/long-term-care-insurance-for.

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“Momentum for health reform may be building again, but interest in improving our system of long-term care supports and services is still lagging,” writes long-term care advocate Howard Gleckman in his newest blog post. Gleckman notes that while the CLASS Act, the late Sen. Edward Kennedy’s long-term care bill, has undergone changes this summer and received President Obama’s endorsement, the legislation could very likely fall victim to the controversy surrounding a public option for health insurance.

But the real reason LTC reform won’t happen is indifference, not opposition Gleckman says. “Overwhelmed by the passionate, high-stakes debate over health reform, many lawmakers remain reluctant to even confront long-term care issues. They are making a major mistake by failing to recognize that the chronically ill need a full range of care that does not end at hospital discharge or when they leave their physician’s office. An elderly widow suffering from Parkinson’s or a young man struggling with multiple sclerosis doesn’t distinguish between personal care and medical treatment. For them, it is all essential care. Congress needs to recognize this, but, at least for now, the odds that it will do so in 2009 remain long.”

So for right now, the best option is still private LTC insurance, or, in some cases, employer-provided LTC insurance coverage, which could be your only safety net if you long term care becomes essential due to age or infirmity. (090914)

This week, New York Times blog, “The New Old Age,” answers questions about long-term care coverage and how the C.L.A.S.S. Act, a bill introduced by Sen. Edward Kennedy (D-Mass) that would establish a national long-term care insurance program, enjoys the possibility of being incorporated into congressional health care legislation. “Congress Tackles Long-Term Care.”

Most analysts appear surprised that the concept of a national LTC program has moved from the theoretical to a possibility of approval. Three congressional committees, however, still need to weigh in with a vote on the program.

Howard Gleckman, a senior researcher at the Urban Institute told the Times “that while some insurance companies oppose the idea, ‘the biggest problem the C.L.A.S.S. Act has isn’t opposition, but indifference — a sense on the Hill that they just don’t want to mess with long-term care.’”

Whether or not the measure passes as part of health care reform – which faces its own serious obstacles – placing the issue of the lack of long-term care coverage in the United States on the front page of major newspapers is helpful and informative for the millions of Americans who can still afford to purchase private coverage or have the capacity to push their employers to offer LTC as part of a benefits package.

The Long Island Business News reports that many people think they have enough insurance until they need the policy. Then they learn its limitations, find they have insufficient coverage, or discover “loopholes big enough to drive a truck through.” Laura Glasser, “With Insurance, the Fine Print Matters,” June 30, 2009. This is particularly true, the article reports, for health and long-term care policyholders because they aren’t reading their policies to understand coverage limitations.

“One reason many people get surprises is they don’t know much about their coverage to begin with. If you’ve read your policy lately, you’re in the minority. Most health policies, for instance, cover up to $1 million in lifetime benefits. But most people don’t know that,” writes Glasser. Here’s what two insurance industry executives had to say about the situation:
“The information’s there,” said Ian Laird, director of strategy, sales and programs for Empire Blue Cross Blue Shield. “It’s just in a document that I don’t think the average person bothers to read.”

“You expect people to read their benefits,” said William Golden, chief executive of UnitedHealthcare’s health plan for New York, of the source of many surprises. “I’m not sure that really happens all the time. It’s important to read the small print.”
Here are two insurance executives admitting in black and white that they are selling policies that people don’t read, filled with fine print that limits coverage, and they appear just fine with the situation. In fact, one wonders if they might be taking advantage of this information by filling policies with fine print loopholes that end up surprising many people.

We say it everyday…and we’ll say it again here: READ YOUR POLICY BEFORE YOU NEED IT. If you don’t understand something, ask someone who can help.

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Will the nation see healthcare reform by the end of summer? Although President Obama is confident he has a workable plan in place, most industry observers believe this latest attempt won’t fare any better than past attempts. “Obama Takes His Health Care Case to the Public,” New York Times.

The stalemate surrounds two issues. The first is the insurance industry’s refusal to consider the creation of a public insurance plan that would compete with the private sector. The industry has agreed to a compromise, which would mean more regulation of insurance premiums and insurer conduct. But we tend to think the industry will continue to fight any government intervention in how it does business.

The other issue involves eliminating the tax break on employer-provided plans. The compromise here might be a limited, less disruptive tax break, which Los Angeles Times columnist Ronald Brownstein says may be the trade off Americans are willing to make if it means slowing down the rise in healthcare costs. “In effect,” writes Brownstein, “limiting the tax exclusion would mean that those with coverage would be purchasing insurance for their insurance.” “Will Americans Buy a Healthcare Trade-Off?”

And then there’s Sen. Edward Kennedy’s bill that includes a long-term care provision that would make long-term care government-provided insurance available for $65 a month. The insurance would provide for modestly priced in-home care, not the more expensive nursing home care, and policyholders would have to pay into the system for five years before receiving benefits. “Senator Edward Kennedy Releases Health Care Bill; Includes Long-Term Care Provision.”
The likelihood of Kennedy’s bill making its way through Congress is negligible, since affordable long-term care insurance will be vigorously opposed the an industry that reaps considerable profits from sales of much more expensive policies. And that’s really the bottom line about why insurers will never support any substantial healthcare reform but will continue to oppose any meaningful legislation.

Insurers are in the business of making money, not providing healthcare. That’s why many companies delay and deny benefits or won’t even insure people who are ill. And they are doing so with little regulation and no competition. Why should they support change? The federal government wants to ensure that everyone in America has access to healthcare by creating affordable policies, while keeping down medical costs. Those two interests are counter to one another, and as long as the insurance industry has a dominate seat at the healthcare reform table, little will be accomplished.

In U.S.A Today this week, elder-care author Howard Gleckman illuminates one of the most important but least discussed issues in the national debate about health care reform: What are we doing to help the elderly and disabled who don’t need acute hospital care but rather personal assistance in their homes. See, “What About Long-Term Care,” May 26, 2009,

Gleckman says Congress is ignoring its chance to change the way our country delivers long-term care ("LTC"), now mostly through Medicare that pays for nursing home treatment which costs thousands more a year than in-home care. Nursing home care could amount to as much as $75,000 a year; a home health aide is paid $20 an hour.

“Congress and President Obama could create a system of universal long-term care insurance, built on a combination of public and private coverage,” writes Gleckman. “They could end the reliance of millions on the welfare-like Medicaid system while reducing the tremendous pressure that program is putting on both state and federal budgets. And, they could further shift the focus of long-term assistance to community care instead of nursing facilities.”

But, concludes Gleckman, long-term care reform is unlikely to happen even though Sen. Edward Kennedy and Rep. Frank Pallone have proposed government-provided LTC insurance that could cost as little as $100 a month.

So where does that leave us? If you are among the seven million Americans who can afford private LTC coverage, you are in good shape to preserve your assets and savings as you age or become disabled. For the rest, this is another wake-up call. Any health reform the federal government is likely to approve won’t be much help for the elderly and disabled. Medicare won’t pay for home health aid, and Medicaid only covers some costs after the patient is impoverished.

Why isn’t the federal government creating a more comprehensive plan? Most likely because it is not getting much help from the most important stakeholder when it comes to the economics of health care, the insurance industry. That industry doesn’t want to take care of the sick, the elderly and the disabled. Rather, insurers are in the business of making money for shareholders. By issuing policies to healthy people then trying to find ways to deny coverage when they get ill, profits can be enhanced. And because they have been getting away with these practices for years means they have no incentive to devise a revolutionary public-private partnership that would provide affordable health care to Americans from the cradle to the grave.

Gleckman calls it a tragedy. What do you think?

In 2000, BusinessWeek wrote about Belle and Abe Lieberman, a Nebraska couple who had purchased a long-term care policy from Penn Treaty Network America Insurance Company. See “Long Term Policies That Will Last.” Back then, the Leiberman’s chief concern was not having purchased a policy that adjusted for inflation. When they increased their benefit from $50 to $100 a day, the yearly premiums jumped from $2,264 to $7,750. They could barely afford the insurance. Little did they know a decade ago that inflation adjustment might be the least of their worries.

About a year later, in April 2001, ElderWeb.com reported that Penn Treaty’s auditors had expressed doubts about the company’s 2000 financial statements. Penn Treaty’s reserves to pay claims had fallen below the regulatory limit and the carrier would need to generate an additional $40 million that year to ensure liquidity. See “Financial Problems for #2 LTC Insurer Penn Treaty.”

By July 8, 2004, Standard & Poor’s still rated Penn Treaty a B- but showed a positive outlook because the company had improved its underwriting and claims practices. The rating service found that the insurer was “Aged, Frail and Denied Care by Their Insurers.” In 2005, Penn Treaty was receiving one complaint for every 1,207 policyholders, one year after collecting $320 million in premiums. (By comparison, Genworth Financial received only one complaint for every 12,434 policyholders.) I spoke with reporter Charles Duhigg for this article, explaining how many LTC insurers conducted business as little more than profit centers, with little regard for their policyholders.

By October 3, 2007, complaints about claims-handling procedures prompted the Senate Finance Committee to conduct hearings. Complaints about LTC coverage had risen 92 percent between 2001 and 2006, reported the New York Times, “Scrutiny for Insurers of the Aged.” Congress asked Penn Treaty, along with Conseco and Genworth Financial, “to provide detailed information about how policyholders’ claims, inquiries and denials are handled and whether employees receive rewards for denying claims.”

In early 2008, rather than focusing on the delivery of services to its policyholders, Penn Treaty hired a new chief marketing officer to expand its national marketing efforts, and two national marketers to assist financial planners in selling Penn Treaty LTC policies. In October 2008, Street.com reported that Penn Treaty “fails,” two days after Pennsylvania insurance regulators seized the company. Options were to sell or liquidate. A March 13, 2009, letter to policyholders explained the Pennsylvania Insurance Commissioner Joel Ario is performing a financial analysis of the company with plans for “rehabilitation.”

What went wrong with Penn Treaty and what can other LTC carriers learn from its demise? First, it seems that Penn Treaty failed to properly underwrite the business, but no one noticed. The young, immature market, supported Penn Treaty's mistakes because they continued to offer product at low prices. When the claims finally started coming in, faster and more furious than predicted, Penn Treaty had little choice but to do everything it could to limit claims pay exposure. This led it to stop being responsive to its customer’s needs and start chasing revenue by way ramping up sales. Hindsight is 20-20, but for Penn Treaty policyholders an old addage proved to be true:"if it sounds too good to be true, it probably is."

And we can’t forget about Belle and Abe Lieberman, the Nebraska couple who sacrificed to pay for an LTC policy they believed would last. We hope the Pennsylvania Insurance Commissioner – and every insurance commissioner around the country who should be evaluating and regulating other LTC carriers before they fail – won’t forget them either.

The Wall Street Journal reported last month about growing concern among consumers about the safety of their insurance policies as insurers of all sizes suffer losses from their bad investments. Other carriers are being “dragged down by higher than expected claims in areas like long-term care insurance.” M.P. McQueen, “Worry Grows Over Insurers as Ratings Slip.”

The article refers to recent events in which regulators took over long-term care subsidiaries of Conseco Inc. and Penn Treaty American Corp. because their reserves fell below state-mandated levels of available capital.

“More trouble could be on the horizon,” writes McQueen. “More than a dozen major insurers have seen ratings downgrades in recent weeks, and several have dropped into categories reflecting relatively weaker financial health. Analysts say their ability to pay claims could be affected by continuing investment losses.”

We’ve been documenting this growing problem on our blog for some time now. And our best advice to consumers with potential claims is not to wait until you hear your long-term care insurer is targeted by regulators. Investigate their financial status now, and if the numbers worry you, perhaps start looking for alternate coverage. Talk to your agent or financial advisor, who may be able to transfer you into similar policies at a more secure company. It may cost you more, but that is better than paying for something that may ultimately have no value. If you already have a claim make sure you pursue it actively and expeditiously. If you need help, call us (800-446-7529), or any other person you know and trust who can help you.

A late 2008 Avalere Health study and chart book commissioned by Long Beach healthcare nonprofit, The SCAN Foundation, contains information that appears to have surprised a lot of people connected with the long-term care industry. The analysis, “Long Term Care: an Essential Element of Healthcare Reform,” reported that seniors, people with disabilities and their families in the United States pay nearly 30 percent of LTC services out of their own pockets – nearly 10 percent more than previous estimates.

In dollars, that means that in 2006, the most recent year figures are available, individuals and their families provided $64 billion out of their own assets to pay for long-term care. Unpaid caregivers, usually family members sacrificing time and resources to care for loved ones at home, provided $350 billion worth of free care. In comparison, private health and LTC insurance contributed slightly more than $16 billion.

The study, which intended to look at Medicare and Medicaid contributions to long-term care in order to propose policy changes, included the private contributions because the figures was so startling to even seasoned policymakers.

“To finance these contributions, most seniors and their families rely on home equity, income from adult children, or retirement savings,” Avalere Health wrote in a press release earlier this month. “All of these asset classes have lost considerable value over the past year, resulting in diminishing funding capacity in the face of a rapidly growing long-term care population.”

The reason private insurance’s contribution to pay for long-term care is so low is twofold. Too few people purchase LTC coverage because it has been too expensive. During the past couple of years, states have partnered with LTC carriers to make coverage more affordable. These policies are worth considering.

The second reason is that insurers are experts at finding ways to delay and deny LTC benefits. If you are old or sick, they figure time is on their side. Some LTC carriers had undercapitalized or spun-off their LTC divisions in such a way that their funds may not outlast their pool of policyholders.

Yet despite these drawbacks, the alternative is far bleaker. Better to purchase LTC coverage now and fight the company for benefits later, than become part of that rapidly growing percentage of people exhausting their assets to pay for care.

With the nation’s financial crisis affecting most American’s retirement accounts, well-known financial-planning expert Robert Valentine recently wrote about why Long Term Care (LTC) insurance is becoming more of an obvious choice than ever before. LTC insurance not only protects investment assets, he says, it also ensures you have a choice in the quality and type of care you receive, something we’ve been pointing out in many of our LTC posts.

Valentine encourages consumers to consider five factors before purchasing LTC coverage:
• Purchase from a solid “A” rated insurer who will likely keep premiums affordable and honor your claim.
• The policy should offer a yearly cost of living adjustment to keep up with inflation.
• Make sure the policy provides for both home and institutional care.
• To ensure tax-free status, opt for a qualified over a non-qualified policy.
• Only purchase a policy that is guaranteed for life and will not be cancelled if your health declines.

These are very good tips. We generally agree with the concept of LTC, but only from financially strong, and reputable carriers…and only when the coverage is clearly spelled out, and covers the things you specifically seek to have covered. There is nothing worse than paying premiums for years and years, all with the expectation of having insurance when you really need it, only to learn that the insurance company is relying on some loophole to deny your benefits. Believe it or not, denials like this happen every single day. We work hard to try and make sure it doesn’t happen to our clients.

Investment News reported this week that the Pennsylvania Insurance Department has seized control of two subsidiaries of long-term care insurer Penn Treaty American Corp. because of their failure to maintain appropriate capital levels. http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090107/REG/901079993.
According to Commissioner Joel Ario, the department hopes to “rehabilitate” Penn Treaty Network and American Network Insurance Company and place them back in the private section. Although the companies are insolvent, says Ario, the state will continue to pay claims. If the insurer cannot be rehabilitated, it will be liquidated and the state will then guarantee each policy up to $300,000.

What this means for California policyholders is still unclear, but individuals with potential claims against the company should act now. The outcome will likely be far from positive. 1/7/09

This week the Pennsylvania Department of Insurance approved a crazy plan that allowed Conseco, Inc., a nationwide provider of long-term care insurance, to “separate” itself from that business by placing its remaining LTC policies (reported at between 140,000 and 160,000 total polices) into what many experts believe is an underfunded trust. See http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081113/REG/811139970.

What were they thinking? And what are the implications for both Conseco policyholders and those insured by other LTC carriers?

The bad news is that this is a dangerous precedent. If the trust is indeed not adequately capitalized, remaining elderly and ill policyholders could be subjected to ongoing rate increases. Because the group is closed, no members will be added to supply new capital to the trust. Those who have the good fortune to live the longest may have the misfortune of needing benefits when the money is gone.

The other bad news is we don’t know how many other LTC carriers will decide following Conseco’s example might be a good business decision for them. They may determine profits are more important than promises and try to divest their companies of expensive LTC policies.

The good news, however, is that insurance commissioners around the country vigorously objected to Pennsylvania’s failure to hold public hearings to field objections to the new trust. Chances are, insurers incorporated in other states won’t get a green light to do the same thing, at least not without intense scrutiny.

The other good news is that not all LTC carriers have run their LTC businesses into the ground. Some are managing quite well, selling affordable policies and caring for their policyholders. Their diligence continues to make LTC insurance a safe and essential component of everyone’s retirement planning.

The final good news is that lawyers like us are still in the business of making insurers live up to their end of the bargain. We’ve litigated against Conseco in the past and have been part of the outcry against regulators allowing Conseco or any insurer to get out from under their obligations. If we have anything to say about it, the fight to keep Conseco responsible isn’t over.

(12/10/08)